Hi, I'm Billy Gwaltney and this is the CYA podcast. This show is for the physician who understands the importance of protecting everything you've worked so hard to achieve. Each week I'll bring you tips and advice to help you cut through the clutter and misinformation and show you exactly what you need to preserve your income and way of life. If you're ready to achieve the peace of mind that only financial security can bring. Let's get started.
Welcome to today's episode of the cover, your assets podcast. This is Billy Gwaltney, and I'm very happy to be with you today. Today, we're going to cover an important question about the cost of disability insurance. Is this cost fixed or does the cost for insurance increase over time? And that's a great question. It's an important question to confirm. And particularly for physicians who are purchasing specialty disability coverage, if your disability policy is structured properly, the short answer is that the cost would be fixed and not increase unless you increase coverage more specifically when it comes to specialty disability coverage, there are contracts that are following in the category of what's called non cancelable and guaranteed renewable.
(01:18): And what that means is, and I'll define that for non cancelable and guaranteed renewable simply means until you reach age 65, the policy cannot be canceled and premiums cannot be increased and restrictions cannot be added as long as you, of course continue to pay the premiums in a timely manner. So regardless of the experience of the insurance company, regardless of any outside forces, unrelated to the policy, the cost is going to remain fixed. Now, obviously if you increase coverage, there's an increase in the cost, but if you never increased coverage than the rate that you start out where you start out at age 30 or age 35 or age 40 or whatever, that'll be the rate you pay for the life of the policy to age 65, you can continue the policy after age 65 on a conditionally renewable basis, which means that they can adjust the rate and provide typically like a two year benefit period.
(02:17): If you're still working at least 30 hours per week, but most people are thinking about, okay, for the, for my career up until age 65, can this cost increase. And if you have a policy with one of the top four disability carriers, as we sit here today in the specialty disability marketplace, they all offer what's called a non cancelable and guaranteed renewable contract where the rate cannot increase. Now, one or more of the top companies offer what's called a guaranteed renewable, only contract. And what this means is they will offer you an additional, usually anywhere from 15 to 18% discount on top of whatever trainee discount or other discount you're accessing, where the contract is guaranteed, renewable only. And what that means is that until you reach age 65, your policy cannot be canceled and restrictions can not be added. As long as you continue to pay the premiums as do.
(03:22): However, the insurance company reserves the right to change the premium rate in the future. Although this change wouldn't be required to apply to all policies that are issued in the same form and the class of occupation that you are in. So every physician specialty would these top insurance countries, you have an occupation classification, and if they have bad claims experience in folks in that occupation class, they could potentially raise the rate for that occupation class. Now they have to do it across the board. They have to do it for every policyholder in that occupation class that bought policies in that particular state. So if you are in Illinois and you purchase a policy there, and you're a surgeon and they had bad claims experience, and they need to raise the rate for surgeons who bought policies in Illinois, then they can petition the insurance department in the state of Illinois to increase that rate.
(04:27): If they do that, and you have a guaranteed renewable contract, then your rate would go up there; currently only one of the top four disability contracts offers the guaranteed renewable only option. A good number of our clients consider that because it's a significant savings over time. And this particular company has never raised the rate in the past. So their track record is excellent, but it is a slightly higher risk category outside of the top four where what's important. And I try to say this as often as I can. The things that we're talking about are everything is kind of appended. All bets are all outside of these top four contracts. When it comes to specialty specific coverage, there just aren't many insurance companies that do this well. And so how they price it, how they, how they structure their contract. That is not my area of expertise.
(05:18): We focus on the top four contracts and that's it because they're the only ones that our clients would want to have if they, if they did have to file a claim typically. And so, as a result of that, when it comes to this smaller universe of contracts, there's only one currently that offers a guaranteed renewable option. So the vast majority of the time you're going to be looking at a contract that is what's considered non cancelable and guaranteed renewable. And that's the first definition I read where they can not do it, change anything. What this means is important over the life of the policy. Number one is whatever discount you secure at the purchase. You keep that discount forever. Number two, what it also means is that regard again, regardless of the experience of the insurance company, your rate is going to remain fixed.
(06:08): If they change the discount in the future, if they raise the rate for people in your occupation and so forth for new policies, that's not going to impact you. What's also important is that if you start again, if you've structured your policy correctly, there should be, what's called a future insurability option on your policy. And when you go to access that additional coverage through that future insurability option, you can also access that same non cancelable and guaranteed renewable rate that contains the discount that you secured at the time of purchase. The same is true with the guaranteed renewable only contract, where you cannot, you would access that lower rate as well. I hope this has helped at least answer initial questions as it relates to the cost for these disability contracts. Sometimes when you answer questions, it serves to lead to additional questions, and sometimes it's easier to have a one on one conversation. So I would be happy to do that. Would welcome the opportunity to discuss this with you further, feel free to text me anytime to arrange a conversation, or if you have questions, my number is (704) 270-2376. Again, that (704) 270-2376. I'd be happy to discuss your situation in time. And again until next time, I hope this has been helpful to you. This is Billy Gwaltney. Thank you as always for carving out a few minutes.
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